IRS Commissioner Rossotti's End-of-Term Report

Internal Revenue Service Commissioner Charles O. Rossotti's five-year term will end in November 2002. In anticipation of that event, Mr. Rossotti has filed an end-of-term report with the Treasury Department's IRS Oversight Board. "We are winning the battle but losing the war," said Mr. Rossotti in his report, explaining in detail his concerns about the future of the IRS in its ongoing crusade to require taxpayers to report and pay their fair share of income taxes.

"The IRS is simply outnumbered when it comes to dealing with compliance risks," according to Mr. Rossotti, who cited a shortage of staffing as one of the major problems facing the IRS. "On the average, the IRS workload grows at a compounded rate of 1.8 percent per year. Therefore, just to handle this increased workload, the IRS would either have to add staff - which is what occurred fairly consistently for the 45-year period from 1950 through 1995 - or would have to increase productivity by 1.8 percent per year just to stay even," he said. Mr. Rossotti suggested that the IRS would have to add 34,864 full-time workers by 2010 to keep up with anticipated demand.

Other concerns that need to be addressed, according to Mr. Rossotti, include a continuation of the modernization process currently in place and a simplification of the tax code. Modernized computer systems must be complemented with trained and effective staff who can operate them properly, he explained in his report. And the changes in 292 sections of the tax code over the past five years have resulted in 515 changes to tax forms and instructions. "Most informed observers are justifiably horrified at the complexity of the tax code," said Mr. Rossotti. "The cost of taxpayer compliance with this code is [more than] $80 billion per year, more than eight times the cost of the IRS budget."

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